PPG Reports Second Quarter 2020 Financial Results
PPG reported second quarter 2020 net sales of $3.0 billion, down approximately 25% versus the prior year. Selling prices increased by nearly 2%. Sales volumes were down 24% versus the prior year. The lower sales volumes reflect the negative economic impacts of the COVID-19 pandemic. Unfavorable foreign currency translation impacted net sales by more than 3%, or about $135 million, and acquisition-related sales, net of divestitures, added less than 1% to sales growth.
Second quarter 2020 reported net income from continuing operations was $99 million, or $0.42 per diluted share, and adjusted net income was $235 million, or $0.99 per diluted share. Adjusted net income excludes business restructuring charges of $128 million after-tax, or $0.54 per diluted share, and certain other adjustments detailed in the reconciliation below. Second quarter 2019 reported net income from continuing operations was $270 million, or $1.13 per diluted share, and adjusted net income was $441 million, or $1.85 per diluted share. For the second quarter 2020, the reported and adjusted effective tax rates were about 23% and 25%, respectively. The adjusted effective rate was higher than expected due to the mix of earnings by country. The second quarter 2019 reported and adjusted effective tax rates were approximately 24%. Reconciliations of the reported to adjusted figures are included below.
“We delivered solid operating results in the second quarter, especially considering the significant declines in economic activity in most of the world due to the COVID-19 pandemic. The strongest performance came from our global architectural coatings businesses, which was driven by increased do-it-yourself (“DIY”) demand of PPG paint products in all major regions,” said Michael H. McGarry, PPG chairman and chief executive officer. “During the quarter, several of our businesses in China, including automotive original equipment manufacturer (“OEM”) coatings, general industrial coatings, and protective and marine coatings, achieved higher sales volumes year-over-year supported by a recovery in Chinese economic activity. Year-over-year demand was lower across most businesses in other major global regions, but our sequential monthly sales volumes improved in each region during the quarter.
“Our quick and decisive actions at the outset of the pandemic helped to mitigate the earnings impact from the lower demand. Our aggregate segment margins were about 13%, which is a significant improvement versus the depths of the prior recession in 2008/2009 when we experienced similar volume declines, and is measurable proof of the structural cost savings that we have delivered over the past several years. In the quarter, we delivered about $170 million of cost savings from various interim initiatives and more than $20 million of incremental structural savings from business restructuring programs. In June, we initiated a new restructuring program targeting up to $170 million of annualized structural cost savings. In addition, aided by strong working capital management, during the quarter we generated nearly $500 million of cash from operations, similar to second quarter 2019 levels. We also continued our legacy of rewarding shareholders with a 6% quarterly dividend increase, reflecting the resiliency of our business model and capability to generate strong and consistent cash flow.
“As the pandemic continues, our focus remains on the protection of our employees and providing excellent support to our customers with the essential products and services they need to resume and ramp-up their operations,” McGarry added. “Looking ahead, we expect overall economic activity to continue to recover, although at a varied pace across end-use markets and regions given the uncertainty around the ongoing effects of the pandemic. We anticipate positive overall global architectural coatings demand trends to continue, with some moderation from the elevated DIY demand experienced in the second quarter. We expect continued, solid recovery patterns in automotive OEM and general industrial coatings demand in the U.S. and Europe, but still below 2019 levels. Automotive refinish and aerospace coatings sales are expected to be lower until travel and vehicle traffic density return toward more normal levels. Discretionary cost management will continue, particularly in those businesses with longer recovery timelines. We have continued to improve our overall liquidity and will prudently manage cash and our balance sheet.
“Finally, I am very proud and pleased with how our global team is managing through this challenging time, and we are on the path to emerge from this crisis as an even stronger company,” McGarry concluded.
For the full second quarter results, click here.
About PPG Industries
At PPG (NYSE:PPG), we work every day to develop and deliver the paints, coatings and materials that our customers have trusted for more than 135 years. Through dedication and creativity, we solve our customers’ biggest challenges, collaborating closely to find the right path forward. With headquarters in Pittsburgh, we operate and innovate in more than 70 countries and reported net sales of $15.1 billion in 2019. We serve customers in construction, consumer products, industrial and transportation markets and aftermarkets.
Mark Silvey – Director Corporate Communications – email@example.com – (412) 759-1735
Source: PPG Industries, Inc.
Source: PPG Industries, Inc.